Question

In 1979, in the face of rising competition in the fast food hamburger market, McDonald’s reduced the price of its cheeseburger to $0.43. If the CPI in 1979 was 37.4 and the CPI in 2005 was 100, what is the price of a 1979 cheeseburger in 2005 dollars? (Round to the nearest penny.)

Answer 1

1.15

Step-by-step explanation:

The computation of the price in 2005 dollars is shown below:

= Price in 1979 × (CPI in 2005) ÷ (CPI in 1979)

= $0.43 × (100) ÷ (37.4)

= (43) ÷ (37.4)

= 1.1497 or 1.15

Simply we do the proportion based on the CPI in 2005 and Price in 1979 and then divide it by the CPI in 1979. Based on the given information, the price in 2005 dollars is 1.15